ADVANCED ENERGY BLOG -- DAVE KARPINSKI

Shale gas supply chain: the big picture, part 1

Blog Entry: December 04, 2012 4:30 AM | Author: DAVE KARPINSKI

DAVE KARPINSKIDave Karpinski is Vice President of NorTech and Director of NorTech Energy Enterprise. He leads the organizations efforts to accelerate economic growth in Northeast Ohio's advanced energy industry and has over 20 years of private sector experience in a variety of manufacturing-related industries.

The supply chain flowing throughout the Ohio shale gas play poses a tremendous opportunity for our region. The overall opportunity for suppliers in our state approaches $9 billion, according to the Ohio Shale Coalition . This includes the vigorous involvement from many types of industries.

There are a few ways to segment the supply chain in order to get a better idea of the players involved. One way is to look at it from the traditional upstream, midstream and downstream view:

• Upstream: Exploration and production tasks involved in extracting the oil and gas

• Midstream: Includes the infrastructure, such as pipeline construction, processing and transportation

Another aspect of the supply chain involves those supplies and services where the logistics dictate that they are obtained locally, such as gravel, landscaping, road construction, etc., as opposed to those components, supplies and services that could be obtained from suppliers anywhere in the world. The latter scenario, which is a bit more subtle and complex, is a huge opportunity for our area and could potentially employ many people. I’ll take a look at that side of the supply chain in Part 2 of this topic, to be published in a couple of weeks.

The opportunity for Northeast Ohio to leverage its logistical advantages becomes apparent in the requirement for local industries and services, especially in the upstream and midstream of the supply chain. These needs include:

Ancillary services create another large local impact that will generate jobs and revenue. These services provide support to the supply chain. Examples include professional services, such as insurance, engineering and legal. Real estate and employment services need to be met. Personal services will also flourish. These include retail, healthcare and food.

But whether a supplier’s competition is local, or further away, the establishment of relationships with buyers, such as the large Oil and Gas (O&G) companies, becomes especially crucial. Economic development organizations have a large role in helping to make relationship connections. Suppliers will need to compete in a new way within the shale industry, even if it’s in their own backyard.

The strategy for economic development to help create an impact in supply chain development within the region has four prongs: 1) inform interested local suppliers by providing data and information to support decisions, 2) educate suppliers on new requirements, such as Master Service Agreements and safety regulations, 3) connect suppliers and buyers through facilitation of networking, and 4) advocate for policies that set the platform for a growth environment.

There are several other resources that provide our region with information on the shale supply chain opportunity. The Ohio University Voinovich School’s Consortium for Energy, Economics & the Environment (CE3) is currently developing the Shale Energy Supply Chain Database. Their supply chain map can help local companies determine markets and service gaps. Organizations such as the Ohio Oil and Gas Association (OOGA) conduct business development seminars.

Existing local industries and the smart entrepreneur that can understand the needs of the shale gas industry, and envision a way to fill those needs, can create a bevy of revenue generating opportunities.

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